0:00 / 0:00
Exports
When the world price is above equilibrium, the country will export the product, which is when we sell our products to other countries.
- In the diagram above, at the world price of $12, the domestic supply is50units and the domestic demand is only30units so this country can export the difference between supply and demand to other countries.
- The exports are equal to the excesssupply.
- In the diagram above the exports =50 - 30 = 20
Wize Concept
Remember the consumer surplus is the area above the price and below the demand.
- WIthout trade, the price is$10so the consumer surplus is the triangle above that (A + B)
- With trade, the price is$12and domestic consumers are buying a quantity of30so consumer surplus is the triangle above that price and quantity (A).
Wize Concept
Remember producer surplus is the area below the price but above the supply.
- Without trade, the price is$10so the producer surplus is the triangle below that (C).
- With trade, the price is$12and domestic producers are selling a total quantity of50so producer surplus is the triangle below that price and quantity (B + C + D). We can summarize all this below:
Before Trade After Trade Change
Consumer Surplus
A + B
A
- B
Producer Surplus
C
B + C + D
+ B + D
Total Surplus
A + B + C
A + B + C + D
+ D
Practice: Exports
Consumers would be worse off, domestic producers would be better off, and more trade would take place when a country starts to: